Sarat Chandra was born into poverty in Debanandapur, Hooghly, India. His family was occasionally supported by other family members and Saratchandra's lack of financial stability would influence his writing in years to come. He started his education at "PYARAI PANDITS" pathshala and then he entered Hooghly Branch High School. Although he began as a fine arts student, Chatterji left his studies due to his persistent state of poverty. He received his early education while residing at his paternal uncle's house in Bhagalpur. He spent 20 years of his life in Bhagalpur and a significant portion of his novels were either written in Bhagalpur or based on his experience in Bhagalpur.

His work represented rural Bengali society and he often wrote against social superstitions and oppression. For a short period he was a sannyasi, a Hindu ascetic who abandons the material and social worlds. His first published story was 'Mandir'. He was particularly sensitive to the cause of women.

After the death of his parents Sarat Chandra left his college education midway and went to Burma in 1903. There he found employment with a Government Office as Clerk. He did not remain at his job in Burma for long and decided to return to his homeland but before his departure he submitted a short story for a prize competition under his uncle's name, Surendranath Ganguli. It won first prize in 1904.

There is a biography of Sharat Babu written by Vishnu Prabhakar, a Hindi writer also known as Awara Masiha. Prabhakar traveled for fourteen years continuously to collect material for this book.

Though he was always known to be an intrepid champion of the marginalised when it comes to novels, personally he was always a shy and private person. There was an occasion when his name was already announced and he was supposed to meet his readers but he left and the curtain was raised on an empty stage.

He died in Kolkata of liver cancer in 1938.

Bartaman Hindu - Mussalman Samasya (literally, Contemporary Hindu - Muslim Problem) is an essay by Sharat Chandra first presented at the Bengal Provincial Conference of 1926. In this short essay, Sharat Chandra argued about the root cause of the inability of Hindu - Muslim unity, and said that it is because of the inherent outlook of Muslims. He expressed his observation that the general Muslim behaviour was characterised by "brutality, barbarism and fanaticism", and that Islam lacked any culture altogether. Considering the unity of Hindu - Muslim to be impractical and unnatural, he argued that instead of pursuing that mirage of Hindu - Muslim unity what was required was unity within the Hindu community. He supported the internal consolidation of the Hindu community. Commenting about this, the eminent historian K. N. Panikkar writes that this manner of thinking contributed to the "construction of a new communal consciousness".

His works have been made into some fifty films in many Indian languages, particularly his novel Devdas made into eight versions, from Bengali, Hindi to Telugu, Parineeta also been made twice, Majhli Didi (1967) by Hrishikesh Mukherjee and Swami (1977). Another famous film "Chhoti Bahu" (1971) is based on his novel Bindur Chhele.

There was another movie partially based on Sarat Chandra's Novel called "Nishkriti", Apne Paraye. Telugu film Thodi Kodallu (1957) is also based on this novel. Gulzar's 1975 film, Khushboo is majorly inspired by his work entitled "Pandit Mashay". The 1961 Telugu film Vagdanam by Acharya Atreya is loosely based on his novel Datta. Also a recent upcoming film in 2011 "Aalo Chhaya" is based on his short story, "Aalo O Chhaya".